Buying a car and buying a house are two of the biggest financial moves most people make—and if you’re planning to do both in the same year, the order matters. A new auto loan or a dip into savings for a car down payment can ripple through your mortgage application in ways many buyers don’t anticipate.
Why a Car Loan Can Complicate a Mortgage
Mortgage lenders look closely at your debt-to-income ratio (DTI)—the share of your monthly income that goes to debt. Most lenders want it under 43%, but lower is always better. A $500 car payment might not sound huge, but it can be enough to push you out of mortgage eligibility or cost you a higher interest rate.
New car financing also triggers a hard credit inquiry and adds a fresh account, which can shave points off your credit score—especially if you don’t have a long credit history. Even a small score drop can nudge you into a more expensive mortgage bracket. And if you spend thousands on a car down payment, you may have less left for your home down payment, closing costs, or cash reserves (which some loan types require).
When Buying the Car First Makes Sense
That said, sometimes you can’t avoid it. If your car is unreliable or you need one for work, buying before the home might be the right call. A responsibly managed auto loan can even help you build credit—just make sure you aren’t stretching your budget. If you can pay cash for the car and still keep your home savings intact, the impact on your mortgage eligibility is much smaller.
Small Adjustments That Make a Big Difference
If you already have a car loan with fewer than ten payments left, lenders may not even count it toward your DTI. Paying off an existing car loan—or refinancing into a lower monthly payment—ahead of a mortgage application can improve your approval odds. Another smart move: if you absolutely need a car, opt for a reliable used model instead of the shiny new one. That smaller loan balance keeps your DTI in check.
Buying Both in the Same Year
If you’re determined to buy both in the same year, timing is everything. Don’t finance a new car in the middle of your mortgage application—lenders re-check credit before closing, and new debt can derail the deal. If you must, wait until after your home closes.
If you flip the order—buying a home first—give yourself a few months before financing a car. You’ll want to see how your new housing costs settle in before adding another fixed payment.
Other Things to Keep in Mind
Refinancing a car loan to lower the payment can help, but it still triggers a credit pull—so do it months before applying for a mortgage, not right before. And before making either purchase, run the numbers.Mortgage calculators can show you how each payment affects your monthly budget and overall affordability.
Why Rate Shopping Matters More Than You Think
The mistake many buyers make is accepting the first offer they get. Lenders don’t all price loans the same way, so it pays to compare mortgage lenders and see how much room you actually have in your budget. Getting the best deal on your mortgage can be the difference between holding off on a car and being able to comfortably afford both.
Key Takeaway
Most of the time, it’s smarter to wait on the car until after you’ve closed on your home—unless you can pay cash or keep your DTI and savings strong. Both purchases are doable in the same year, but understanding the order and the impact of each move can save you thousands and prevent last-minute surprises.